Private acquisitions: procedures, issues and current trends in Indonesia



In Indonesia, there are many types of acquisitions, including asset acquisition and shares acquisition. The latter is further divided into direct acquisition and indirect acquisition. Direct acquisition occurs when the acquisition is conducted through the sale of shares, while indirect acquisition occurs when the acquisition is conducted through the issuance of new shares. In this article, we will elaborate more on a direct shares acquisition, particularly in a private company.

Based on Indonesian Law No. 40 of 2007 regarding limited liability companies (Company Law), shares acquisition means a legal act conducted by a legal entity or individuals to acquire either all or most of the shares in a company, which may result in a change of control. Unfortunately, the definition of change of control is not defined clearly under Company Law. In general, control is interpreted as having more than 50 percent of shareholding percentage in the company. However, it is not clear in some transactions whether there is a controller holding more than 50 percent. The definition of controller is vague, which may result in a different interpretation for the transfer of shares of a shareholder holding 40 percent of shares in a company while the rest of the shareholders only hold a small percentage of ownership. Some may view this as an acquisition transaction while others may not. Therefore, in this case, there is no black and white standard.

Taxation for direct acquisition

For direct acquisition, the seller will have an obligation to pay taxes in relation to the capital gain arising from the transfer under the following conditions. First, if the seller is an Indonesian tax subject, the obligation to pay tax on the capital gains is the seller’s obligation; there is no obligation on the part of the buyer to withhold any amount from the sale price. Second, if the seller is a foreign tax subject, the resident buyer must withhold 20 percent of the estimated net income (i.e., the capital gain amounting to 25 percent of the transaction value) to the seller from the sale, except where the applicable tax treaty regulates otherwise. Third, if the target is a publicly listed company, the obligation to pay tax on the capital gains will be subject to final income tax at the rate of 0.1 percent of the gross amount of the transaction, provided that the sold shares are not the founder’s share, otherwise the tax will be added by 0.5 percent of the nominal value of the shares in the company by the closing of the stock exchange at the end of 1996 or the nominal value of the shares in the IPO if the shares are listed on the stock exchange after 1 January 1997.

In relation to this tax obligation, if the seller is a multinational company, it will usually prefer to complete the deal outside of Indonesia, in a country which has a favourable tax regime for it. In this case it usually has some layers to own the shares in an Indonesian company.

Taxation for indirect acquisition

If the acquisition is achieved by subscription of new shares, it will not be subject to tax. Nevertheless, if the subscription of new shares is based on the conversion of an existing loan, it may be subject to tax if the amount of advances is lower than the value of shares. Further, Government Regulation No. 15 of 1999 stipulates that the conversion of a certain form of claim into shares must be announced in two newspapers.


Regarding the general procedures in conducting an acquisition, the target company shall at least: (i) announce a summary acquisition plan in at least one national newspaper; (ii) announce the acquisition plan to employees in writing; (iii) hold a general meeting of shareholders (GMS) and obtain other corporate approvals as may be required to approve the acquisition plan; (iii) apply to the investment coordinating board (BKPM) for approval of the acquisition (only if it involves foreign investment); (iv) sign a notarial deed of acquisition; (v) obtain approval or receipt of notification in relation to the acquisition from the Ministry of Law and Human Rights (MOLHR); (vi) announce the result of the acquisition in at least one national newspaper; (vii) update the shareholders’ register of the company; (viii) issue new shares certificates of the company; (ix) update the company registration; and (x) notify or report to the Business Competition Supervisory Commission (KPPU) if the acquisition exceeds a certain amount as stipulated in Government Regulation No. 57 of 2010.


The above process is normally completed within two to six months (or longer), subject to the complexity of the transaction and the industry.

Miscellaneous issues

Authorised government authorities. In general, the authorised government authority in Indonesia dealing with acquisition transactions is the MOLHR. However, if foreign investment is involved, the company must also deal with the BKPM, which handles foreign investment in Indonesia. The parties need to obtain the BKPM’s approval before the acquisition transaction can be completed.

In addition to the MOLHR and the BKPM, other authorities are also involved for some specific industries: the financial services authority (OJK) for insurance, FinTech lending, finance companies, capital markets, pension funds and banking institutions); Bank Indonesia for companies dealing with money or legal tender, including banks; Ministry of Public Works for construction companies; and BP Oil and Gas for companies dealing with oil and gas, including but not limited to the production sharing contract scheme.

Negative list. If the acquisition transaction involves a foreign investment, the foreign acquiring party must consider a negative list of the Indonesian government, which divides the possibility of foreign investment into two categories: restriction to foreign investment and open to foreign investment under certain conditions.

Employees. When conducting a shares acquisition transaction in Indonesia, parties must consider the interest of employees. In general, employees do not have a direct say in a merger or an acquisition. However, if the merger or acquisition results in a change of control, employees will be entitled to request termination and receive severance payment. Pursuant to Law No. 13 of 2003 regarding manpower (Labour Law), once employees decide to terminate their employment with the company, the company will be required to pay the severance package (severance payment, service appreciation payment and compensation payment) to the employee, the amounts of which are regulated under the Labour Law or the company’s regulation or the Collective Labour Agreement.

Antitrust reviews. KPPU regulates that acquisitions which fulfil certain criteria need to be notified to the KPPU. This criteria includes: (i) if the transaction is not between affiliated companies; (ii) if the combined national assets of the parties exceed IDR2.5 trillion; (iii) if the combined national revenue of the parties exceeds IDR5 trillion; and (iv) if the combined national assets exceed IDR20 trillion – for banking institutions. Combined national assets or national turnover means the total amount of assets and turnover of the parties and their parents/subsidiaries in Indonesia. If the thresholds are met, then the transaction must be reported to KPPU within 30 days of its effective date. Failing to report may result in a monetary sanction of IDR1bn per day with a maximum monetary sanction of IDR25bn. The KPPU also provides a chance for business entities conducting acquisitions to have a pre-consultation with the KPPU.

Divestment requirement for certain industries. In conducting the acquisition transaction, the acquirer should understand that for certain industries in Indonesia (mostly relating to natural resources), among others the mineral sectors, there might be a regulation regarding divestment. If so, the foreign investor is expected to transfer its ownership to local parties within a certain period.

Language law requirement for the transaction documents. It is worth noting that there is a mandatory language requirement governed under the prevailing laws and regulations in Indonesia. The Indonesian government enacted Law No. 24 of 2009 on Flag, Language, National Emblem, and National Anthem on 9 July 2009. Article 31 paragraph 1 of the law provides that Indonesian language must be used in agreements involving Indonesian private institutions or Indonesian citizens. Paragraph 2 of the Article further provides that agreements involving foreign parties must also be written in the national language of those foreign parties and/or the English language.

Following this requirement, the conservative approach is to sign both an English version and Indonesian version of the transaction documents to avoid potential challenge or objection to the validity of the transaction documents. If it is not feasible to achieve the conservative approach, the best legal approach is to make the signing of documents translated into Indonesian as a condition subsequent. However, the legal risk of the transaction agreements being invalidated remains until the condition subsequent is satisfied.

Recent development

The current direct shares acquisition trend in Indonesia is mostly undertaken by Indonesian unicorn technology companies (backed by global giant venture capital companies), Japanese conglomerates, certain power plants which reach commercial operation and Indonesian small banks which cannot fulfil minimal capital under Indonesian architecture rules and are taken over by other Indonesian banks.

Chinese, Korean and South East Asian companies are becoming active in acquiring companies. Other attractive sectors include mining, retail and healthcare.


Freddy Karyadi is a partner and Anastasia Irawati and Sarah Faisal Rosa are associates at Ali Budiardjo, Nugroho, Reksodiputro. Mr Karyadi can be contacted by email: Ms Irawati can be contacted by email: Ms Rosa can be contacted by email:

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Freddy Karyadi, Anastasia Irawati and Sarah Faisal Rosa

Ali Budiardjo, Nugroho, Reksodiputro

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